Author Topic: Reader Case Study: Recovering from BK - from darkness into mustashianism...  (Read 10157 times)

starterstache

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Hi Everyone

Been lurking here for the past 3 months and really enjoy the positive financial environment.  Ive been an extremely poor financial role model despite having a fairly decent job and stable living situation.  At a young age, I was sucked into the consumerism mantra without realizing what I was getting myself into.  I quickly became underwater in debt (30K+) and didnt have any plan to escape it.  I robbed my 401k to buy toys I didnt need, which was completely idiotic looking back now and I probably needed several good face punches at the time.  Anyway, the past is the past and Im now trying to reconcile my financial future after coming off a bankruptcy two years ago.

Im currently 34 years old, married to a lovely wife (33), with a son (2 ).  We all live in southern California, which is obviously a very expensive location but this is required due to my job. I feel like for the past year, were finally able to get our financial life in some order and actually talk about our FIRE future.

At the moment, my wife stays at home with our son though she does have a side business that helps to generate some additional income.  Im the sole breadwinner and make around $85K pre-tax.

We currently own our home, which we were able to salvage through the bankruptcy.  Unfortunately Looking back, this was a good decision as the value has gone up tremendously over the past 3 years.  We also bought at the low-end of the market, which has allowed us to live in a great neighborhood while not having an insanely large place currently 2000 sq ft.  The only downside is the location relative to my work, which is about a one hour commute (each way).  However, I currently utilize a vanpool option which allows us to only need one car for my wife during the day.  Generally Im able to work from home two days per week, which means Im only having to deal with the commute 2-3 days per week.  The time Im in the vanpool, I can be doing other things so its not really wasted time.

Heres a little more specific info about myself, before asking my specific question(s):

Income: $85K pre-tax + possible bonus at year end (2-3k) which we dont include in our budget.
Not including my wifes income here because its so variable.  Id say she makes maybe 5-10k per year, max.

Monthly Income post-taxes and 401K:  $5057

Current expenses - Bills:

House - $1835/mo (incl. taxes/insur)
HOA - $100/mo
Car (2012 Honda Fit) - $250/mo I know, facepunch.
Cellular - $160 (working to get this reduced)
Internet - $70 (I work from home a lot, so not sure I can go with slower/less reliable service)
Electricity - $100
Gas - $40
Gym - $110 (Most of this is my wifes personal training, which she will be dropping at the end of the year.  Should be down to $40 then)
Gardener - $65 Facepunch part deux ☺  Im in the process of acquiring some yard tools from my neighbors to start doing this on my own.
Water Bill - $50
Term Life Insurance (wife & myself, 300k ea.): $45

Total Bill Expenses:  $2825/mo

Current expenses - Funds:

Gas (includes Vanpool @ $111/mo):  $300
Groceries: $700 (don't see us cutting this much with 3 people)
Entertainment: $100
Medical: $100
House Maint.: $75
Car Maint: $75
Personal Care (hair, products, etc.): $125
Gifts: $40
Clothing: $75
Pets: $75
Xmas Savings: $100
Travel Savings: $100
Emergency Savings: $100 + any extra income from my wife

Total Funds/mo:  $1965/mo - Obviously all of this money isn't spent each month, as we let some of these funds build up for awhile.

Assets:

Emergency Savings: $4K (currently working to reach 15K)
Home Value - $400K
401k - $13K; currently contribute 8%, plus 4
Pension $3.5K (total, yes, thats it not much)
T-Rowe Price IRA $6.8K
501b - $2.7K

Total:  426K definitely not good for our age, especially since most of this is equity in the house

Liabilities:


Mortgage:  243K
Honda Fit Car: 13K

Total: 256K

TOTAL NET WORTH:  160K

Specific Question(s):

I recently calculated our savings rate for the past year via Mint, which equated to around 21% (incl. 401k).  Obviously this is nowhere near mustashian enough, and Im looking to hit the 50% mark by March of 2015.

In my situation, would you consider selling the home to move closer to work?  The difficulty here is that home rental pricing near my company is probably 2-3x where Im living now (in the 2.5-3.5K range for similar sq footage).  There is definitely no way I could afford to buy near my workplace, given the home prices are in the 600K range.  Also, my wife absolutely loves our neighborhood (I do too), plus the schools are excellent for our son once he reaches that age. 

Im investigating a lot of options for budget reduction over the next 6 months, so I can hopefully continue to push our savings rate higher.  Any guidance or helpful hints would be greatly appreciated ☺

Thanks in advance!
-StarterStache
« Last Edit: August 29, 2014, 04:12:17 PM by starterstache »

thedayisbrave

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Honestly, I wouldn't move just to make the commute shorter, if you love everything else about where you live.  The fact that you only have to commute 2-3x a week helps.  Is reducing this even more an option at all? As in, working from home 4 days a week and come into the office for meetings on 1 day?

I'm a little confused about the home equity though... It says home value $130K but then you have a $243K mortgage and $400K equity???

The first immediate things I would do are 1) cut the gardener 2) cut the gym and 3) work on the cell plan.  Why does your wife need the personal training? And even $40 is a lot, IMHO...

 

Cheddar Stacker

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You didn't spell out the monthly net wage, but based on all the numbers I'd guestimate somewhere in the $5K range? Monthly expenses are $3,500, so whatever you clear over that should be used for savings. That's a lot of wiggle room. Can we assume this was previously used to pay down debts and/or get through the bankruptcy, and will now go towards investing?

Here's what I would do:

1) Keep the house. It's reasonable for SoCal. Pay the mortgage very, very slowly for now. The mortgage is manageable and if renting/buying near work would cost more it doesn't make a lot of sense. The big problem you have though is 90% of your net worth is idle in your home equity. You can fix this with #2 and #3.

2) Whatever your monthly surplus begin to invest heavily. Use the 401k for this. 8% is not enough to get you anywhere. This is where you will accelerate your path easiest. You've been lurking so I'm sure you've heard the madfientist reference. If you haven't read him yet, go check him out.

3) Cut your expenses as much as you can. Our family spends more than that in the Midwest so I'm not perfect either, but there's room to trim some of that. Anything you save, invest it.
« Last Edit: August 29, 2014, 02:12:53 PM by Cheddar Stacker »

Cassie

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I don't think that it would make any sense to sell your house to be closer to work given the $ facts in your case.

genselecus

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Your expenses don't seem too bad. People have already pointed to a few things. I'll only add that you write "approx $700 for food, etc." I'm not sure what is included in "etc." but I would guess that it includes a lot of fat (for example, you have no items associated with clothing, baby items, entertainment, vacations, etc.). I would try to figure out how much you are actually spending in some of those categories because my guess is that your monthly expenses are actually higher than $3525. Figure that out and then you'll have a better idea of what you are spending. You can't cut anything until you know what's available to be cut. Another example: if your wife earns 5-10k per year, what are you doing with that? Is this a new source of income or is this something that has existed and has also disappeared in the expense sheet.

Good of you to join the site and share your situation. I wish you the best.

frugaliknowit

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With your proposed cuts, your budget looks decent (compared to average Americans).

However, if you want to be a badass:

Your mortgage is about 3X income.  Yes, I know, California, blah, blah, blah.
For someone at your income, you should consider less square footage.
2000SF is luxury for a mustacian making 85K.  More sf, more taxes,
more everything (especially over time).


historienne

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Big factor against a move: I would expect that your recent bankruptcy would make it more difficult for you to either buy or rent a new place.  Landlords of better units are not going to be excited about that, and I imagine that you will either not be able to get a mortgage, or only be able to get one with a high interest rate.

starterstache

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You didn't spell out the monthly net wage, but based on all the numbers I'd guestimate somewhere in the $5K range? Monthly expenses are $3,500, so whatever you clear over that should be used for savings. That's a lot of wiggle room. Can we assume this was previously used to pay down debts and/or get through the bankruptcy, and will now go towards investing?

Here's what I would do:

1) Keep the house. It's reasonable for SoCal. Pay the mortgage very, very slowly for now. The mortgage is manageable and if renting/buying near work would cost more it doesn't make a lot of sense. The big problem you have though is 90% of your net worth is idle in your home equity. You can fix this with #2 and #3.

2) Whatever your monthly surplus begin to invest heavily. Use the 401k for this. 8% is not enough to get you anywhere. This is where you will accelerate your path easiest. You've been lurking so I'm sure you've heard the madfientist reference. If you haven't read him yet, go check him out.

3) Cut your expenses as much as you can. Our family spends more than that in the Midwest so I'm not perfect either, but there's room to trim some of that. Anything you save, invest it.

Thank you Cheddar!  Really appreciate the detailed response.  I've updated my original post to include more information such as my monthly income post-taxes/401k and additional monies going into my monthly funds.

Still have a ton of work to do in reducing our monthly outgo, and I'm focused on eliminating many of the wasteful services we have today.  I'm planning for all of this additional money to go directly towards to the 401k, with the objective to be at a 15% 401k contribution rate by March 2015.  Still not great, but I have to start somewhere and keep increasing over time, as many of these changes take time to implement.

I agree with the house comments, I'm not sure if I can find a better deal in SoCal for our current living situation.  Also, if god forbid I did lose my job at some point down the road, the payments aren't so overbearing that we couldn't make due for awhile.  That wouldn't be the case if we were to move closer to my job and have a 3K/mo rental payment.

Again, thank you!  I'm going to respond directly to the other posts as well via the 'quote' feature, as that seems to be the easiest way to address each person's feedback individually. :)

starterstache

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Honestly, I wouldn't move just to make the commute shorter, if you love everything else about where you live.  The fact that you only have to commute 2-3x a week helps.  Is reducing this even more an option at all? As in, working from home 4 days a week and come into the office for meetings on 1 day?

I'm a little confused about the home equity though... It says home value $130K but then you have a $243K mortgage and $400K equity???

The first immediate things I would do are 1) cut the gardener 2) cut the gym and 3) work on the cell plan.  Why does your wife need the personal training? And even $40 is a lot, IMHO...

Sorry, I goofed with my initial math.  I believe this has been corrected in my updated post, as the house equity should be 157K.

Definitely appreciate the feedback, and cutting the things you mentioned are the first order of business.  Gardener will be gone next week, Gym will be reduced dramatically in the next year, and I already was able to cut $30 monthly off the cell phone bill today.  Still planning to switch carriers eventually and get that down even further eventually, however, it's tough because we rely on our phones for business activities too - which require significant data/minutes.

Thanks for the quick response to my post :)

starterstache

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I don't think that it would make any sense to sell your house to be closer to work given the $ facts in your case.

Yes, this seems to be a common theme and I'm glad to hear folks are recommending to keep the house.  I'm pretty sure my wife would be devastated to move, even if it was closer to work for me.  Thanks!

starterstache

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Your expenses don't seem too bad. People have already pointed to a few things. I'll only add that you write "approx $700 for food, etc." I'm not sure what is included in "etc." but I would guess that it includes a lot of fat (for example, you have no items associated with clothing, baby items, entertainment, vacations, etc.). I would try to figure out how much you are actually spending in some of those categories because my guess is that your monthly expenses are actually higher than $3525. Figure that out and then you'll have a better idea of what you are spending. You can't cut anything until you know what's available to be cut. Another example: if your wife earns 5-10k per year, what are you doing with that? Is this a new source of income or is this something that has existed and has also disappeared in the expense sheet.

Good of you to join the site and share your situation. I wish you the best.

Thank you for the positive response.  I was very excited to find this site and know there is a large group of people implementing this savings plan.  Definitely helps make these life changes easier to manage, when you can share the experience with others. 

I agree with not having listed all of my monthly 'fund' type expenses, and I've now updated my original post with that information for more transparency.

In terms of my wife's income, this is a relatively new source of income as she's started her own business.  We've basically been adding that to our savings plan in both the emergency fund and travel savings.  Unfortunately her brother is getting married next month and we have to fly our to Arkansas for the wedding.  Good news is we've planned for this and saved, so it won't create any new debt - a huge accomplishment for us given our previous spending habits.

Looking forward to continuing to share my progress on this site :)

starterstache

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With your proposed cuts, your budget looks decent (compared to average Americans).

However, if you want to be a badass:

Your mortgage is about 3X income.  Yes, I know, California, blah, blah, blah.
For someone at your income, you should consider less square footage.
2000SF is luxury for a mustacian making 85K.  More sf, more taxes,
more everything (especially over time).

No question my home would be considered excessive by mustashian standards. However, there aren't many other choices given the current economy and home pricing here.  As everything has skyrocketed recently, my 240K mortgage is essentially costing me less than it would to rent a 3-bedroom (1200 sq ft) apartment.

We prefer not to be stuck in a rental situation, as we don't want to be uprooted every year with my son starting school. 

Long-term we probably will retire somewhere outside of California to avoid the excessive taxes and higher housing prices.

starterstache

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Big factor against a move: I would expect that your recent bankruptcy would make it more difficult for you to either buy or rent a new place.  Landlords of better units are not going to be excited about that, and I imagine that you will either not be able to get a mortgage, or only be able to get one with a high interest rate.

Yes, this is absolutely a factor in the equation.  You can't get a conventional home loan for 4 years post-BK.  Therefore, we'd have another two years before we could even consider moving and actually buying a new place.  Renting may be more lenient, but as you stated the best properties may be difficult to obtain.  Factor in rent at somewhere near 2x what we're paying now, and it's a hard pill to swallow.

Sounds like the best starting point is to cut expenses elsewhere and direct those monies immediately into our investment vehicles.

Thanks :)

Cheddar Stacker

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Ok, 2nd read through the original post with more details revealed a lot more.

Expenses plus savings categories = ~$4,800. After cutting a bit on cell, gym, and gardener you are closer to $4,600. Time to keep cutting based on that $5K net income.

First, let's address the savings stuff. Its ok to save some, but not ideal to save in so many categories for "spendy" stuff like vacations and xmas gifts. Try to cut that $1,200 xmas budget a bit. In your situation, a $4k emergency fund is big enough. I wouldn't go bigger, but if you must, please invest it in some stock mutual funds to get some benefit.

Pet expenses could likely be reduced a bit. Personal care/Hair could likely be reduced, but don't piss off your wife to do so. You want her to want to do this and some of this might not be negotiable for her.

Here's the biggest problem though: $700/month on food is no bueno. Please go read MMMs "kill your $1,000 grocery bill" and "grocery shopping with your middle finger." This expense is twice what it could be unless you have specific medical needs like celiacs, diabetes, etc.

Lastly, you could save a bit on life insurance. Its small, but I would shop that around again. We pay about $480/yr for $800k total coverage. I'd look into that. Paying an entire yr or 6 months at a time usually saves some expense as well.

Another Reader

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Since you are in a vanpool three days a week and work from home the other two, there's no life sucking commute that would push you to move.  You bought low, your taxes are lower than buying another property because of Prop 13.  However, you are woefully behind where you should be in savings and investing.  I think it's reasonable to take housing off the table.  Your goals therefore are increasing the household income and decreasing the other expenses.

I would start with expenses.  $700 for food for three people is too high.  Since your wife is a SAHM with a small side business, she could prepare all the meals from scratch, on a budget.  No prepared foods, no soda, no fast food, etc.  Shopping sales, meal planning, and cooking would be good uses of her time.  Entertainment, the cell phone plan, personal care, gifts, clothing, travel - every dollar in these categories should be budgeted and the total allocation should be much lower.  Sit down with your wife and Mint or whatever tracking program you use and work out how much you can cut from these budget items.

Contributing to a 401k at work in pre tax dollars will lower your take home pay less than the nominal amount.  Cut your budget $400 a month?  Up the 401k by $500-$600 a month.  In your shoes, I would force myself to make budget cuts by upping that workplace contribution substantially.  My goal would be to max it out ASAP.  Annual contributions of $17,500 plus the employer contribution of 4 percent or $3,400 will add up quickly.   

You need other savings as well.  How much effort would it take your wife to bring in $20-$25,000 a year?  That would fund two IRA's and some cash savings.  I would sit down with the spouse and figure out what she can do to double or triple the revenue while still having time for your son and the household stuff.  Two IRA's would be another $11,000 a year invested.

What about your job?  Are you anticipating any raises or promotions?  What could you do to increase your income?  Are there classes, certificates, or other training that would make you more valuable?  Would applying for higher paying jobs be a worthwhile investment of your time?  What about a side job or some consulting work?

Once you maximize household income and minimize expenses, your savings rate will increase dramatically.  In turn, your net worth will start to ramp up.  You will see the effects of compounding.  Even with a late start, you will be on your way to FI.

Cheddar Stacker

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@starterstache. I know this is likely very overwhelming right now, but its what we do here. Optimize everything. Re-read everything another reader, me, and everyone else just said. Dig deep. In 2 years when that bankruptcy shadow is gone, you will feel so free you may never need another loan again.

But you will get one anyway, because if someone wants to give you $200k for 30 yrs at 4%, and you are confident you can invest it and return 8%, then you will know you've won the game.

Welcome to the forum!

starterstache

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Ok, 2nd read through the original post with more details revealed a lot more.

Expenses plus savings categories = ~$4,800. After cutting a bit on cell, gym, and gardener you are closer to $4,600. Time to keep cutting based on that $5K net income.

First, let's address the savings stuff. Its ok to save some, but not ideal to save in so many categories for "spendy" stuff like vacations and xmas gifts. Try to cut that $1,200 xmas budget a bit. In your situation, a $4k emergency fund is big enough. I wouldn't go bigger, but if you must, please invest it in some stock mutual funds to get some benefit.

Pet expenses could likely be reduced a bit. Personal care/Hair could likely be reduced, but don't piss off your wife to do so. You want her to want to do this and some of this might not be negotiable for her.

Here's the biggest problem though: $700/month on food is no bueno. Please go read MMMs "kill your $1,000 grocery bill" and "grocery shopping with your middle finger." This expense is twice what it could be unless you have specific medical needs like celiacs, diabetes, etc.

Lastly, you could save a bit on life insurance. Its small, but I would shop that around again. We pay about $480/yr for $800k total coverage. I'd look into that. Paying an entire yr or 6 months at a time usually saves some expense as well.

Thank you for continuing the detailed advice.  Really appreciated! 

Re: Pet expenses, we're going to start buying all our food and litter at Costco - which should help tremendously.  Unfortunately we currently have 4 cats, and that is obviously hurting that part of the budget.  Costco should help this with at least $20-30 savings per month.

Personal care should be dropping down too, as my wife will be getting her hair down less frequently.  Otherwise, she doesn't get anything else fancy - nails, etc. are all done at home.

Re: Food budget, the $700/mo also includes all household supplies such as cleaning and toiletries.  I should have mentioned that earlier, which I believe makes it a bit more reasonable considering we still have to buy some nighttime diapers for my son, etc.  Definitely think we could do better here though, and am making a conscience effort to drive this down closer to $500-600/mo.

I'll definitely check out your recommendation to shop the life insurance with multiple providers.  Haven't done that in a few years and can hopefully find a little savings there once I've finished focusing on the bigger monthly expenses :)

Thanks!

starterstache

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Since you are in a vanpool three days a week and work from home the other two, there's no life sucking commute that would push you to move.  You bought low, your taxes are lower than buying another property because of Prop 13.  However, you are woefully behind where you should be in savings and investing.  I think it's reasonable to take housing off the table.  Your goals therefore are increasing the household income and decreasing the other expenses.

I would start with expenses.  $700 for food for three people is too high.  Since your wife is a SAHM with a small side business, she could prepare all the meals from scratch, on a budget.  No prepared foods, no soda, no fast food, etc.  Shopping sales, meal planning, and cooking would be good uses of her time.  Entertainment, the cell phone plan, personal care, gifts, clothing, travel - every dollar in these categories should be budgeted and the total allocation should be much lower.  Sit down with your wife and Mint or whatever tracking program you use and work out how much you can cut from these budget items.

Contributing to a 401k at work in pre tax dollars will lower your take home pay less than the nominal amount.  Cut your budget $400 a month?  Up the 401k by $500-$600 a month.  In your shoes, I would force myself to make budget cuts by upping that workplace contribution substantially.  My goal would be to max it out ASAP.  Annual contributions of $17,500 plus the employer contribution of 4 percent or $3,400 will add up quickly.   

You need other savings as well.  How much effort would it take your wife to bring in $20-$25,000 a year?  That would fund two IRA's and some cash savings.  I would sit down with the spouse and figure out what she can do to double or triple the revenue while still having time for your son and the household stuff.  Two IRA's would be another $11,000 a year invested.

What about your job?  Are you anticipating any raises or promotions?  What could you do to increase your income?  Are there classes, certificates, or other training that would make you more valuable?  Would applying for higher paying jobs be a worthwhile investment of your time?  What about a side job or some consulting work?

Once you maximize household income and minimize expenses, your savings rate will increase dramatically.  In turn, your net worth will start to ramp up.  You will see the effects of compounding.  Even with a late start, you will be on your way to FI.

Glad you asked about the job and income situation.  I'd say there is a good likelihood I'll get a raise and/or bonus at year end, but it's probably not going to be anything spectacular.  At this point I'd rather not count on anything and if something happens, it will be added to the savings pool.

In terms of my wife, she's working hard to get her business going full steam before my son starts pre-school at the beginning of next year.  I believe if she's successful, it will pull in another $1000k/mo.  That doesn't sound like much, but if she takes a job in her field she'll likely have to commute 45 mins/day, which would mean us having to buy a second car (plus gas, insurance, etc.).  In the end, we'll probably break even and have better quality of life if she is able to make her home-based business a success.  Obviously time will tell, and she's already committed to going back to a regular job if her business isn't successful - although thus far it's been going spectacularly well.

As you mentioned, at this point my primary goal is to cut budgetary expenses to come up with another $400-500/mo that I can contribute into my 401k.  This should be $500-600 pre-tax, which will certainly add up quickly if I can keep it fully funded for the next 10-15 years.

Glad to hear you're on the same page regarding my housing situation.  I'm hoping to sit on this place for 30-years and have very low living expenses once I'm ready for retirement.

starterstache

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@starterstache. I know this is likely very overwhelming right now, but its what we do here. Optimize everything. Re-read everything another reader, me, and everyone else just said. Dig deep. In 2 years when that bankruptcy shadow is gone, you will feel so free you may never need another loan again.

But you will get one anyway, because if someone wants to give you $200k for 30 yrs at 4%, and you are confident you can invest it and return 8%, then you will know you've won the game.

Welcome to the forum!

Thank you for the positive reinforcement!  It's actually not that overwhelming, as I've been reading this site for awhile and seen similar advice offered up to many other people.  Obviously none of this is easy and requires sacrifice at first, but I'm sure our entire family will be happier as a result.  After all, the goal is to realize what makes you 'truly' happy in life and reduce all the other crap :) 

As far as the BK is concerned, I actually think that was one of the best decisions I've ever made.  Despite the hit to my credit, it greatly accelerated my debt reduction and allowed me to start saving that money instead.  I didn't really need the credit anyway, as I already had a decent house and car that I can get by with for many years. 

I've been rebuilding my credit via a credit card that is paid off every month, and already back to a 670 credit score (which obviously isn't great, but still decent considering a BK) after less than 2 years.

I'm sure I'll be checking back within the next 6 months for an update on my progress.  Thank you all for the warm welcome and supportive attitude :)

Bob W

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?

Bob W

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Sorry about the ? Error post.  Typing on tab.       This is a great post you've made.  First, keep your home it is your "constant" and a net positive from the bankruptcy.  Second max out 401 and IRA for wife.  You should have near zero taxes.  See the rootofgood blog for how to pay zero fed tax.        Next, cut cell,gym,Gardner,entertain,Xmas, and emergency fund.      You food is twice too high. See the mentioned post. Time to rename the 100 emergency fund to investment fund.  Your car gas can be cut 150. Since you commute by van your basically over diving by 1200 a month and greatly depreciating you cars value.  Shoot for 400 miles month.   In your situation zero would be doable.   Figure 25 cents per mile depreciation.  That is 350 a month hidden cost in your budget.   Guesstimating your wife income of 500 month you could be saving an additional 1800 per month by making adjustments mentioned. Put every penny of savings after 401k and IRA toward car pay off.  So in one year you will be debt free and very close to a 50% savings rate.   

iris lily

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If your wife can pull in $1,000 per month, that is a nice amount considering that she'll be staying home to care for children AND will be able to cook scrath meals to keep grocery bills down.

No more cats! But thanks for taking in these 4 cats. so many are euthanized due to lack of homes.

Cassie

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My other suggestion is to keep some prepackaged food in the freezer for days that are hectic & exhausting. I do that & it helps a lot since then we are not tempted to go out to eat.  I second the applause for taking in the cats!!

starterstache

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Sorry about the ? Error post.  Typing on tab.       This is a great post you've made.  First, keep your home it is your "constant" and a net positive from the bankruptcy.  Second max out 401 and IRA for wife.  You should have near zero taxes.  See the rootofgood blog for how to pay zero fed tax.        Next, cut cell,gym,Gardner,entertain,Xmas, and emergency fund.      You food is twice too high. See the mentioned post. Time to rename the 100 emergency fund to investment fund.  Your car gas can be cut 150. Since you commute by van your basically over diving by 1200 a month and greatly depreciating you cars value.  Shoot for 400 miles month.   In your situation zero would be doable.   Figure 25 cents per mile depreciation.  That is 350 a month hidden cost in your budget.   Guesstimating your wife income of 500 month you could be saving an additional 1800 per month by making adjustments mentioned. Put every penny of savings after 401k and IRA toward car pay off.  So in one year you will be debt free and very close to a 50% savings rate.   

Thanks for the feedback.  When you say "Next, cut cell,gym,Gardner,entertain,Xmas, and emergency fund.", do you mean reduce all of these to zero?  Realistically, I don't see that being possible.  However, I think Gardener and Gym could be gone, with the others reduced by 50%.

Regarding the car usage, we're trying to come to grips with less gas usage.  However, given we're cutting most other things out we'd still like to use our car for day trips to various free activities that occur frequently within our area.  I think $180 is a more achievable goal for gas, which would be two tanks/month plus the ~$100 for my vanpool.  We do have bikes, but they need some fixing up and I'll have to buy a child carrier to transport my son around.  Again, doable and certainly something to put on the list for the next couple of months.

Food - I agree we need to have a second look and strategize how to spend less.  Obviously that's a common theme throughout this thread.

Emergency Fund - Are you also saying that 4K is enough for now and that $100/mo should now be heading into my 401K?

Again, thanks for taking the time to respond to my post :)

starterstache

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If your wife can pull in $1,000 per month, that is a nice amount considering that she'll be staying home to care for children AND will be able to cook scrath meals to keep grocery bills down.

No more cats! But thanks for taking in these 4 cats. so many are euthanized due to lack of homes.

Yes, the cat situation has gotten a bit crazy.  We definitely didn't intend to end up with 4 cats - it's a long story.  Anyway, as you stated we don't plan for anymore and two of them are older, so they likely won't be around in a few more years.

Regarding my wife's income, I think $1000 will be aspirational - I'd honestly be happy with even $500/mo provided that can go directly towards reducing our tax burden via IRA contributions.

Thanks again for the response :)

starterstache

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My other suggestion is to keep some prepackaged food in the freezer for days that are hectic & exhausting. I do that & it helps a lot since then we are not tempted to go out to eat.  I second the applause for taking in the cats!!

Good suggestion on the pre-packaged food.  We generally have left-overs when we do cook, so I'm trying to be better about either taking those to work or eating them within the next day or two.  We have been pretty bad about buying a lot of pre-made items at Trader Joes, and I think we could probably make a lot of these things on our own. 

Thanks again for the suggestion! :)

Dicey

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...[M]y son starts pre-school at the beginning of next year.

Why does your son need to go to pre-school if he has a SAHM? I'm assuming this is not public education and will be another budgetary line item. Can you clarify, please? 

I'll ditto keeping the house, plus everything else Cheddar Stacker and Another Reader said.

I understand needing a good phone/fast provider for business. I've had good luck with Metro PCS, which has joined forces with T-Mobile. We pay $35/month (including taxes!) for unlimited talk, text and data. I was a manufacturer's rep with a large territory and found Metro PCS to be about the same as everyone else in terms of coverage.

Cheddar Stacker

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...[M]y son starts pre-school at the beginning of next year.

Why does your son need to go to pre-school if he has a SAHM? I'm assuming this is not public education and will be another budgetary line item. Can you clarify, please? 

I'll ditto keeping the house, plus everything else Cheddar Stacker and Another Reader said.

I understand needing a good phone/fast provider for business. I've had good luck with Metro PCS, which has joined forces with T-Mobile. We pay $35/month (including taxes!) for unlimited talk, text and data. I was a manufacturer's rep with a large territory and found Metro PCS to be about the same as everyone else in terms of coverage.

We do preschool with a mostly SAHM for many reasons. Structure. Socialization. Etc. Its only a couple hrs/day and a couple days/week so not too expensive. Nearly our entire huge family clan is painfully introverted so we are doing everything possible to foster socialization very, very very early. I have a few nieces/nephews on the autism s.d. I have others who have been diagnosed with other serious social issues.  No major concerns for us, but we are being proactive/preventive.

starterstache

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...[M]y son starts pre-school at the beginning of next year.

Why does your son need to go to pre-school if he has a SAHM? I'm assuming this is not public education and will be another budgetary line item. Can you clarify, please? 

I'll ditto keeping the house, plus everything else Cheddar Stacker and Another Reader said.

I understand needing a good phone/fast provider for business. I've had good luck with Metro PCS, which has joined forces with T-Mobile. We pay $35/month (including taxes!) for unlimited talk, text and data. I was a manufacturer's rep with a large territory and found Metro PCS to be about the same as everyone else in terms of coverage.

We do preschool with a mostly SAHM for many reasons. Structure. Socialization. Etc. Its only a couple hrs/day and a couple days/week so not too expensive. Nearly our entire huge family clan is painfully introverted so we are doing everything possible to foster socialization very, very very early. I have a few nieces/nephews on the autism s.d. I have others who have been diagnosed with other serious social issues.  No major concerns for us, but we are being proactive/preventive.

As Cheddar Stacker said, we're hoping to give our son some added Structure and Socalization outside the home.  Right now the plan is for only 2-3 hours, twice per week.  This equates to about $250 per 3 months, which is insanely cheap for pre-school in our area.  The extra funds will come from my wife's income from her at home business. 

Definitely a much better solution than her going back to work full-time and having to pay for full time pre-school plus after care.  That can easily run $700+/month where we live, which is simply a crazy price to pay in our opinion.

Hope that helps :)

Thegoblinchief

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See my comments inline:

Car (2012 Honda Fit) - $250/mo I know, facepunch. <--- What is the rate on the loan? If low, just pay off as normal. The fit should hopefully last a long time. Most of the cost is already sunk here.
Cellular - $160 (working to get this reduced) <---- Easiest way to do this is to pay any applicable ETFs and switch to the MVNO which is compatible with your carrier's network; e.g. Verizon/Sprint-->Pages Plus, Cricket, boost, etc.; ATT and T-Mobile-->AirVoice or P'Tel.

Current expenses - Funds:

Gas (includes Vanpool @ $111/mo):  $300 <--- That's still an AWFUL lot of driving for one mostly SAH parent, especially in a bike-friendly area. Try to cut the non vanpool gas to below $100.
Groceries: $700 <---- Actually, with the third person still being quite little, going under $500 is easy-peasy. A stretch goal would be $300. For reference, I feed family of 5 very active bikers on $600.
Entertainment: $100 <--- Reduce to $50
House Maint.: $75 <--- You'll find this is probably low over time. I'd bump the savings up here.
Car Maint: $75 <--- Ditto
Personal Care (hair, products, etc.): $125 <--- Say what? My $600 grocery budget includes all personal care except my wife and daughters' haircuts at ~$100 a year.
Clothing: $75 <--- Seems high

T-Rowe Price IRA $6.8K <---Probably not very low expense ratios. I'd check into this and move to Vanguard or Fidelity (specifically their Spartan funds if needed.

Yes, a lot of your NW is tied in a house, but for having survived bankruptcy, you're actually in pretty decent shape. Optimize your expenses as noted above and you'll be well on your way to FI.